ESMA and its implication

So ESMA started to mess up the trading in Europe earlier than expected.
Got this email today. It is 29th MAY and the email says it will be applied since 28th May :)
Dear Client,

We would like to inform you about a new leverage limitation for EU clients which came into effect starting 28th of May, 2018. The leverage for all the clients from the European Union has been reduced to 1:50.

Please note that this restriction applies to both current clients and newly registered customers. We recommend to consider updated conditions when opening new trades.

All changes are made in accordance with the requirement of the European Securities and Markets Authority (ESMA)
Thank you.

Best Regards,
ForexMart Team

I believe the Team of the ForexMart did not understand correctly :)
ESMA restriction should become in force 2 months after publishing in Official Journal of the EU, but as far as I know ESMA still did not proceed with publishing. :)

Great Input indeed, this will change the whole picture of margin trading. However applying the new rules from 28th of May, 2018 is strange, I do not see any official publication in their web site for finally adopting the changes...

Yeah I guess they understood it wrong, so it is good to know about that broker :)
In anyway leverage will be 1:30 which is quite draconian.

My broker started to apply ESMA regulations from Saturday 26th May 2018.

To trade lots with actual size, will be necessary an account maybe ten times bigger, plus it will be the restriction with 50% DD of account, so when the DD reaches 50% of the account, from what I understood all trades will be closed for account 'protection/preservation'.
In the end there will be no more retail Forex traders in Europe, we have to find brokers accepting poor Europeans looking for better conditions to trade.

Sceadagenga posted:
My broker started to apply ESMA regulations from Saturday 26th May 2018.

Which broker is it?

ovisun posted:
To trade lots with actual size, will be necessary an account maybe ten times bigger, plus it will be the restriction with 50% DD of account, so when the DD reaches 50% of the account, from what I understood all trades will be closed for account 'protection/preservation'.
In the end there will be no more retail Forex traders in Europe, we have to find brokers accepting poor Europeans looking for better conditions to trade.

Exactly, I am already looking on brokers not affected by ESMA

ETX is the broker

Here is the e-mail I received on the 18th May 2018.



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Username: XXXXXXXXXXXXXXXXXXXX
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ETX Capital

  
 


Dear XXXXXXXXXXXXXX,

 This is a gentle reminder that the new 50% margin close-out rule will come into effect in 1 week's time on 26th May.

 This is the first of a number of changes the European Securities and Market Authority (ESMA) will be introducing that will impact your trading activity with us. As a highly valued ETX trader, we are committed to making these new requirements as manageable as possible for you.

 Please note, the close-out rule will apply to Retail and Professional clients in this instance. If you are still unsure of the impact of the 50% close-out rule on your trading, simply get in touch with our Client Services team, who will help you with any questions on +44 (0) 20 7392 1494 or [email protected]

How will the new margin close-out rule work from 26th May? •When your account equity falls below 100% of the minimum required margin for your open position(s), you are at risk of being closed out.
•Once your equity falls below 50%, your positions are reduced to bring your account equity back over 50%.
•Any open positions on 26th May will become subject to the new margin close-out rules.
Example scenario under the new 50% close out rule
 You have £1,000 in your account and you open a UK 100 position that requires £500 margin. If that position runs a loss of £750, you will have £250 equity remaining after the running loss, which is 50% of the £500 margin required to cover the open position. In this scenario, under the new rules, we will need to reduce or close this position until your account equity reaches 50% of the £500 margin required to cover the open position.

 Kind regards,
 ETX Capital
 

Sceadagenga posted:
ETX is the broker

Here is the e-mail I received on the 18th May 2018.



View Online
 

Username: XXXXXXXXXXXXXXXXXXXX
Forgot your password?
  

  


ETX Capital

  
 


Dear XXXXXXXXXXXXXX,

 This is a gentle reminder that the new 50% margin close-out rule will come into effect in 1 week's time on 26th May.

 This is the first of a number of changes the European Securities and Market Authority (ESMA) will be introducing that will impact your trading activity with us. As a highly valued ETX trader, we are committed to making these new requirements as manageable as possible for you.

 Please note, the close-out rule will apply to Retail and Professional clients in this instance. If you are still unsure of the impact of the 50% close-out rule on your trading, simply get in touch with our Client Services team, who will help you with any questions on +44 (0) 20 7392 1494 or [email protected]

How will the new margin close-out rule work from 26th May? •When your account equity falls below 100% of the minimum required margin for your open position(s), you are at risk of being closed out.
•Once your equity falls below 50%, your positions are reduced to bring your account equity back over 50%.
•Any open positions on 26th May will become subject to the new margin close-out rules.
Example scenario under the new 50% close out rule
 You have £1,000 in your account and you open a UK 100 position that requires £500 margin. If that position runs a loss of £750, you will have £250 equity remaining after the running loss, which is 50% of the £500 margin required to cover the open position. In this scenario, under the new rules, we will need to reduce or close this position until your account equity reaches 50% of the £500 margin required to cover the open position.

 Kind regards,
 ETX Capital
 

I do not know the broker, but their explanation and understanding of the margin and equity is weak.
I recommend you change the broker

I had an account with ETX and closed it after I received myself their message regarding ESMA.
Let's try to assemble a list with brokers who at least for moment accept Europeans and have normal conditions. From my experience I know about two and please do not tell they are in fiscal heavens as long as they send your money when you request them:
1: Forex4you
2.FBS

50℅ margin closeout rule has been there for years. This is nothing new. Why it is hilited and relevant now is that leverage will be significantly reduced with ESMA ruling hence traders are more likely to encounter margin calls. I think the broker is doing due diligence to alert the fact.

TradingtheCloud posted:
50℅ margin closeout rule has been there for years. This is nothing new. Why it is hilited and relevant now is that leverage will be significantly reduced with ESMA ruling hence traders are more likely to encounter margin calls. I think the broker is doing due diligence to alert the fact.

Leverage in fact will be worse than in USA.
1:50 vs. 1:30
Because many unresponsible idiots lost all their capital everybody will be punished.
Moreover I have seen wiped accounts even with such low leverage - check the Systems here on MFB.

It seems some brokers are super, overprotective for having introduced the Margin Close Out rule earlier than expected.
From the official publications , the measures are entering in force from the 1st of August 2018...

togr posted:

Leverage in fact will be worse than in USA.
1:50 vs. 1:30
Because many unresponsible idiots lost all their capital everybody will be punished.
Moreover I have seen wiped accounts even with such low leverage - check the Systems here on MFB.

Yes, the leverage drop can not help bad trading. I think the main purpose is to protect brokers from smart traders taking very small risk capital to make 100x or 1000x easily. This is what affecting their bottom line.

This whole ESMA regulation will simply fire backwards and REALLY BADLY, as it will only push retail traders to sign up with unregulated off-shore brokers who will be very happy to provide not only 1:400, but 1:500 or even 1:1000 leverage because their clients will never see their funds again anyway... But of course, it will not be the problem of the EU anymore.

Personally, I was a victim of a New Zealand registered and 'regulated' broker who had offered the BEST conditions, the BEST leverage (even 1:1000), the BEST EVER no-slippage ('in-house') executions, then after collecting $500k+(!) client funds the owner has simply closed shop and disappeared... Including his broker website... Even though he was indicted by the Canadian authorities (he is an Iranian-Canadin citizen) the $500k+ clients funds have never been recovered.

TradingtheCloud posted:

togr posted:

Leverage in fact will be worse than in USA.
1:50 vs. 1:30
Because many unresponsible idiots lost all their capital everybody will be punished.
Moreover I have seen wiped accounts even with such low leverage - check the Systems here on MFB.

Yes, the leverage drop can not help bad trading. I think the main purpose is to protect brokers from smart traders taking very small risk capital to make 100x or 1000x easily. This is what affecting their bottom line.

Nope. The main purpose is to protect traders to lose everything.

FxMasterGuru posted:
This whole ESMA regulation will simply fire backwards and REALLY BADLY, as it will only push retail traders to sign up with unregulated off-shore brokers who will be very happy to provide not only 1:400, but 1:500 or even 1:1000 leverage because their clients will never see their funds again anyway... But of course, it will not be the problem of the EU anymore.

Personally, I was a victim of a New Zealand registered and 'regulated' broker who had offered the BEST conditions, the BEST leverage (even 1:1000), the BEST EVER no-slippage ('in-house') executions, then after collecting $500k+(!) client funds the owner has simply closed shop and disappeared... Including his broker website... Even though he was indicted by the Canadian authorities (he is an Iranian-Canadin citizen) the $500k+ clients funds have never been recovered.

Yes that will be the outcome,
outflow of european traders to offshore brokers.
Bad for everybody.
I do often tell EU will regulate as much and as long there will be something left to destroy.

It is possible for EU regulators can go after offshore brokers accepting EU clients. Just like US and Japanese regulators fined many brokers signing up their citizens.